THIS BLOG RATES THE S&P 500 BUY/SELL/OR HOLD EACH DAY WITH 2-GOALS FOR LONG TERM INVESTMENTS: (1) PRESERVE CAPITAL (2) BEAT THE S&P 500.
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Tuesday, May 17, 2016

CPI (24/7WallStreet)“…the Consumer Price Index (CPI), came in at 0.4% on the
headline report...the core CPI, which excludes food and energy…rose by
0.2%, in line with expectations.…year-over-year …The headline CPI was up 1.1% from April
of 2015, but the core reading was up a sharp 2.1% from a year earlier.”http://247wallst.com/economy/2016/05/17/mixed-bag-on-inflation-via-cpi-reading/My cmt: These numbers look high to me given that gasoline
prices were down year-over-year. For more, see Doug Short’s analysis at…http://www.advisorperspectives.com/dshort/updates/CPI-Headline-and-CoreHOUSING (MarketWatch)“Construction on new houses rebounded in April after a
sharp dip in the prior month, but a slowdown in building permits suggest work
on new properties could taper off from last year’s double-digit pace.” Story
at…http://www.marketwatch.com/story/us-housing-starts-climb-66-in-april-2016-05-17INDUSTRIAL PRODUCTION (ABC News)U.S. industrial production in April posted the biggest
increase since November 2014 as utility output surged, the Federal
Reservesaid Tuesday.”
Story at…http://abcnews.go.com/Business/wireStory/us-industrial-production-jumps-november-2014-39166191My cmt: The article pointed out that much of the increase
was due to increased production by utilities associated with a return to cooler
weather after an unusually warm March.CHINA ECONOMIC DATA DISAPPOINTS (BBC News)“China's National Bureau of Statistics said on Saturday
that industrial output rose 6% year-on-year in April, compared with 6.8% growth
the month earlier. Fixed-asset investment grew by 10.5% in the January-to-April
period, compared with an increase of 10.7% the year before. Retail sales grew
by 10.1% in April from a year earlier. They all missed market expectations. Vishnu
Varathan from Mizuho bank said the activity data raised concerns about China's
renewed slowdown and exacerbated "woes about global demand
deficiency".http://www.bbc.com/news/business-36299548LACKER SAYS CASE FOR JUNE FED HIKE IS STRONG (CNBC)“The case for an interest-rate increase in June “looks to
be pretty strong,” said Richmond Fed President Jeffrey Lacker on Monday…The
Richmond Fed president is not a voting member of the Fed policy committee this
year. He has been one of the most forceful advocates in the central bank for
hiking rates.” Story at…http://www.marketwatch.com/story/feds-lacker-says-case-for-june-rate-hike-looks-pretty-strong-2016-05-16My cmt: With inflation picking up, it would seem
possible, but still un-likely for June.TIME TO SHORT (CNBC)Monday, Raoul Paul, founder of Global Macro Investor said
on CNBC’s “Fast Money” show that it was time to get short the market. He
recommended using stops to limit losses. MARKET REPORT / ANALYSIS-Tuesday, the S&P 500 fell about 1% to 2046 at the
close. -VIX rose about 6% to 15.57.-The yield on the 10-year Treasury rose to 1.76%.Tuesday, we had another big move down. The size of the
down-move was statistically significant and that means that the price-volume
move exceeded my statistical parameters and, in about 60% of the time, that
leads to an up-day the next day (Wednesday). This is the seventh statistically
significant day in the past 3-weeks.As
I’ve noted recently, these up/down moves tend to happen near tops, so this
flip/flopping (3-days-up and 4-days-down) is a bearish indication. The last time the S&P 500 experienced 7-statistically
significant days in a 3-week period was in December 2015.The market fell 9% in the following 3-weeks so it's hard to be bullish now.MONEY TREND & SHORT TERM TRADINGThe short-term Money Trend indicator is drifting up, Tuesday,
a bullish signal.This is due to the
10-day moving average used in this indicator.11-days ago was worse than today, so the indicator improved even though
today was a down day. I continue to hold short positions mostly in SH and some
in QID, but those will have to go if the market reverses upward and exceeds my
pain-target of 2110 on the S&P 500. MARKET INTERNALS (NYSE DATA) The 10-day moving average of the percentage of stocks
advancing (NYSE) rose to 50.5% Tuesday. It was 49.3% Monday. A number above 50%
is usually GOOD news for the markets, but again, my 10-day averages may be
giving a false signal today.On a longer term, the 150-day moving average of advancing
stocks dipped to 51.4%. A value above 50% generally indicates an up-trend.The McClellan Oscillator (a Breadth measure) declined
and remained negative – a negative indicator in the short-term. New-highs again outpaced New-lows. The spread (new-highs
minus new-lows) was +75 Tuesday. (It was +148 Monday).The 10-day moving average of the change in
spread was +1. In other words, over the last 10-days, on average; the spread
has increased by 1 each day. Market
Internals remained neutral on the markets.

Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late.They are most useful when they diverge from
the Index.In 2014, using these
internals alone would have made a 9% return vs. 13% for the S&P 500 (in on
Positive, out on Negative – no shorting).Of course, few trend-following systems will do well in an extreme
low-volatility, nearly straight-up year like 2014.

TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATIONOn 30 Dec I reduced my invested position in my retirement
account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in
the TSP) and on 15 Jan I reduced stock allocation to zero in long-term
accounts. If the S&P 500 index closes
above 2110, I plan to add to my stock allocation.The S&P 500 peaked in Mid-May and has not been able
to break higher in the past 12-months. That looks like a top to me. See “Why
the Bull Market May be Dead” in my 14 December blog at…http://navigatethestockmarket.blogspot.com/2015/12/stocks-are-topping-time-to-sell-hussman.html

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About Me

I am an engineer with a lifelong interest in "playing with numbers" so what could be more fun than trying to develop a system that beats the stock market? Well, lots of things, but I decided to do this anyway.
While I am not a finance-professional, or professional investor, I have developed some skills.
I competed in two CNBC Million Dollar Portfolio contests finishing in the top 4% in 2008 (34,320th of 800,000) and the top 0.1% (448th of 500,000) in 2009. More importantly, I managed to sell out of my retirement accounts at or near the top in 2000 and 2007 and bought close enough to the bottom that I didn’t lose too much sleep. (Even Bill Gates lost SOME sleep.)
I hope that my thoughts will help you achieve your investing goals. Please remember that my ideas are free and there may be times when my ideas are worth less than what you paid.